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Books; People; Ideas : These are few of my favourite things. As I live between day-to-day compromises and change-the-world aspirations, this is the chronicle of my journey, full of moments of occasional despair and opportune discoveries, of connections and creations, and, most of all, my quest of knowledge as conversations.

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Is There A Business Opportunity in Indian Vocational Education?

I am in the process of advising a friend who is keen to invest in Education space in India, and this made me look closely into the dynamic of the businesses in the Vocational Training sector.

The overall, macro, factors look promising indeed. A huge population base - India will have 10 million young people entering the workforce every year from 2015 - and a changing social dynamic, when organised employment expands rapidly, are hugely important drivers. The government has been handing out huge orders for training the rural youth, and the companies we are talking to have large mandates at hand, for 'employability' training. There is a capacity building fund set up through National Skills Development Corporation (NSDC), a sort of a special purpose bank extending funding for companies in the space: Again, the companies we looked into had large NSDC allocations, which they have left unused.

Indian government has promoted 'skills' training opportunity with great gusto, with the former Prime Minister, Dr Manmohan Singh, announcing at one point the goal of training 500 million people in 10 years, an eye-watering number for most Western companies and investors. India did not have the infrastructure to offer this training, as detailed in the report from Sannam S4, a market entry consultancy (Read here): Nor it did decide what skills these millions of people could be trained on. The strategy seemed to have been to throw money at the problem - set up a public-private funding initiative in the form of NSDC to advance capacity building loans and to channel educational funding through various Ministries and State Governments - and let the desirable training programmes emerge through the interaction between the employers and training providers. Seen this way, the 'skills strategy' was more a Public Relations exercise than a strategy, and as expected, it turned out to be a stillborn.

To be fair, some progress has been made. There are new provisions of training in remote areas of India, which was not there. In a number of new areas, welding, for example, there is enormous expansion of available training provisions. India's burgeoning industries, like Retail or Rural Banking, depend on this newly trained manpower. In effect, there are a number of people who have found jobs through these programmes who wouldn't have got anything otherwise.

That said, if one measures this progress against the amount of money that has been spent, it would surely come up short. Corruption is rife in the sector, with ghost learners being reported (to be fair, it is the same thing everywhere) and money being spent on things which were not strictly necessary. But this should indeed be seen as an opportunity: The quality of offerings is so low that a new player can simply differentiate themselves in terms of consistency, an enticing prospect! The scope of innovation is wide open - most of the initiatives in India are poorly thought through, even the better ones are copy-and-paste from western templates - and any serious player can possibly make a huge difference.

However, the vocational training sector in India still faces huge challenges and may not be very attractive for smaller investments.

The first problem is lack of organised employment in most sectors: If the training company does not have the capacity to employ the trained people themselves, many government funded programmes will be non-starters.

The second problem is that the business does not scale. The businesses we are talking to often present business plans extending to hundreds of thousands of learners, indeed the NSDC conditions demand that they should be able to serve at least 100,000 in ten years, but the geographical strategy underlying this is far more complex than it appears on paper. In fact, it is at this level, villages and small towns, Indian diversity is at its best; lack of infrastructure and institutional unity at its worst.

The third problem is that at this level of involvement, nothing other than face to face instruction works, and everyone around the table knows that there isn't enough expertise, let alone teachers, in the vocational skill areas.

The fourth problem is that these skills can not be taught within a short time. This is the assumption almost all training providers and policy makers: What is there in construction that can't be taught through a six months' course? But these skills are often taught through long term apprenticeships, and trying to package them as classroom commodities didn't work anywhere. Once you change the time needed to build the skills, and the apprenticeship forms, the businesses look unviable.

Having gone through the details of the NSDC funding, one knows that the terms are very restrictive, more restrictive in some cases than usual bank loans. NSDC loans are long term and offers a cheaper interest rate, so some providers may have drawn it, but overall, they are hardly suitable for projects that assume risks of building infrastructure for a low margin operation.

In summary, the vocational training space in India, despite the rhetoric, may not be very attractive for smaller businesses. There is a huge social problem to be solved, but there is not much money to be made. Besides, the new government's priorities may be already shifting, and the gratuitous handouts from ministries that kept some businesses going for a while may dry up soon. The last government made a decision to throw money at creating a new ecosystem of training; the new government, out of financial prudence, may look at the existing training infrastructure the country already has in terms of schools and colleges, and may start channeling the money there. It will surely make sense, if India needs 500 million skilled people, to rejig the school curriculum to make these vocationally relevant.

Indian education has a billion dollar opportunity for a private business, but this may be in a different sector than vocational training. As far as the skills training is concerned, it remains too fragmented, both vertically (no organised employment opportunity) and horizontally (geographically as well as between cities and towns and villages): The government policies are misdirected, which is not a good thing when a large scale consolidation must be attempted: Besides, prudence may dictate a change of government policy and this risk needs to be factored in any investment in the sector. At this stage, India's vocational education problem still remains in the domain of public sector: Private investment may have other attractive destinations, such as Higher Ed.

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